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SEC Guidance on Key Performance Indicators and Metrics in MD&A and Three New MD&A C&DIs

Key Performance Indicators and Metrics in MD&A

On January 30, 2020, the Securities and Exchange Commission (the “SEC”) released guidance on the disclosure of key performance indicators and metrics in Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”). The guidance reminds companies that Item 303(a) of Regulation S-K requires disclosure of information not specifically referenced in Item 303 that the company believes is necessary to an understanding of its financial condition, changes in financial condition and results of operations. As a result, many companies disclose key performance indicators and other metrics, such as total samples tested per month, active users per month, comparable store sales and other company-specific metrics, in their MD&A.

In addition to reminding companies to make sure the disclosure of metrics complies with any applicable regulatory disclosure framework (such as GAAP and Regulation G for Non-GAAP Financial Measures), the SEC emphasizes that companies should consider what information may be necessary to provide adequate context for an investor to understand the disclosed metrics. The SEC generally expects the following to accompany the disclosure of key performance indicators and metrics:

  • a clear definition of the metric and how it is calculated;
  • a statement indicating the reasons why the metric provides useful information to investors; and
  • a statement indicating how management uses the metric in managing or monitoring the performance of the business.

In addition, the SEC believes that if a company changes the method by which it calculates or presents a metric from one period to another, the company should consider the need to disclose, if material, the following:

  • the differences in the way the metric is calculated or presented compared to prior periods;
  • the reasons for such changes;
  • the effects of any such change on the amounts or other information being disclosed and on amounts or other information previously reported; and
  • such other differences in methodology and results that would reasonably be expected to be relevant to an understanding of the company’s performance or prospects.

Depending on the significance of the change(s) in methodology and results, the company should consider whether it is necessary to recast prior metrics to conform to the current presentation and place the current disclosure in an appropriate context.

The SEC also reiterated that it is important for the company to have the proper controls and procedures in place to ensure that disclosure of the key performance indicators and metrics is both consistent and accurate.

New CD&Is on MD&A

Three new Regulation S-K Compliance & Disclosure Interpretations (“C&DIs”) on MD&A were also issued in January 2020. Each of these C&DIs relate to Instruction 1 to Item 303(a), which allows a company to omit the discussion of the earliest of the three years included in the audited financial statements from its MD&A if that discussion has already been included in a previous filing. CD&I 110.02 clarifies that the statement required under Instruction 1 that identifies the location in the prior filing where the omitted discussion may be found does not incorporate such disclosure into the new filing unless the company expressly states that the information is incorporated by reference. CD&I 110.03 provides that if a company believes that a discussion of the first of three years is necessary to an understanding of its financial condition, changes in financial condition and results of operations, the company must include the information in the filing or expressly incorporate the information from a previous filing. CD&I 110.04 provides that registration statements that incorporate by reference a Form 10-K that omits the discussion of the earliest of the three years under Instruction 1 will not include the discussion of the earliest of the three years unless, as indicated in CD&I 110.02 discussed above, the information is expressly incorporated by reference in the Form 10-K.


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Dan is a corporate and securities attorney whose practice spans the full gamut of corporate law. He has advised clients for over two decades in public and private equity and debt financings, securities law matters, mergers and acquisitions, and strategic advice on a broad range of other corporate matters. He capably counsels public and private companies with offerings, compliance, and securities questions and leads buyers and sellers throughout the transaction process. Dan represents life sciences companies as well as clients in other technology fields, financial services, and professional services firms.

Amanda Mei


Amanda Y. Mei is a Mintz attorney who focuses her practice on securities transactions, public offerings, and general corporate matters, primarily for life sciences clients.